Five steps to get from A to Debt-Free

Depending on your attitude, debts hanging over your head can end up becoming more than the sum of their parts. Over 75 per cent of Australians live with debt - and when it comes to big dreams, like owning your own home or starting a new business - it can be almost impossible to avoid .

The problem is, if they're unmanageable debts, they can end up costing you even more than money. Financial stress can have a huge impact on your mental cognition and ability to make decisions - in fact, a recent study by the University of Berkley showed money pressures can actually reduce your IQ by up to 13 points, which is alarming.

If debt is keeping you up at night, it might be time to stop avoiding and get competitive. It's you against the debt, and knowing what works will be your added advantage:

Feel the fear, and do it anyway. You can't tackle what you don't fully understand, so write down a list of every debt to the last cent, including credit cards, loans from friends, store cards and outstanding direct debits. Prepare yourself to be shocked, but know this is as scary as it gets. If you are struggling to repay your debts, it's also worth contacting each of your debtors, as most will accept payment plans or instalments.

You can't avoid things like rent, utility bills and groceries, but being conscious of dining out, buying random snacks, Ubers and impulse clothes shopping (anybody?) can cut a lot more fat than you think. Every time you say 'No' to these things, you're saying 'Yes' to becoming debt-free and a whole lot more relaxed about your money.

There are two popular methods for paying off debt: Snowball and Avalanche.

Snowball is where you pay off your smallest debt first, regardless of the interest rate. This gives you a motivational boost to tackle the next, and the next. With Avalanche, your focus is the debt with the highest interest rate, which will suit you if you're just into saving as much as possible. With both strategies, when one debt is gone, you tick it off and roll onto the next on your list.

It's time to get creative with your earning capabilities. Consider freelancing, selling unused items around your house, asking for extra hours (or even better: A raise). It's worth checking out Airtasker.com, where users post small jobs, for earning inspiration and opportunities.

Remember, every debt paid off is a victory. When you find your motivation wavering, remind yourself why you're doing this: freedom, peace of mind, restful nights, and to feel good about your future. If you miss a week, or make a mistake, get back on track, and most importantly, give yourself a pat on the back for trying! The ability to rise to a challenge will get you further than a high IQ ever could.

READ MORE:

Sisters Ali & Gaby Rosenberg are the co-founders of Blossom App.